Abnormal Audit Fees and Restatements

Blankley, Alan I.; Hurtt, David N.; MacGregor, Jason

doi:10.2308/ajpt-10210

Cited by 296 publications

(201 citation statements)

References 56 publications

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“…Indeed, since the sample used in this study differs substantially from the sample used by prior researches (e.g., Blankley et al, 2012), new insights and contributions are provided in the relationship between ABAFEE and financial restatements. What follows is a succinct review of unique characteristics of the TSE and the Iranian immature audit market:…”

Section: Introductionmentioning

confidence: 94%

“…The failure of an auditor to detect and prevent all material misstatements and errors is regarded as the primary reason behind the occurrence of financial restatements. Prior research attributes this failure to the impaired auditor independence (Beck et al, 1988;Magee and Tseng, 1990;Stanley and DeZoort, 2007;Blankley et al, 2012). In this case, the lack of adequate professional scepticism while conducting the auditing process leads to an economic bonding between auditors and their clients which consequently impairs auditors' independence (Bazerman et al, 1997;Blankley et al, 2012).…”

Section: Future Restatements and Abafeementioning

confidence: 99%

“…The relationship between financial restatements and audit fees has recently been tested by some empirical researches (Kinney et al, 2004;Bloomfield and Shackman, 2008;Blankley et al, 2012). The failure of an auditor to detect and prevent all material misstatements and errors is regarded as the primary reason behind the occurrence of financial restatements.…”

Section: Future Restatements and Abafeementioning

confidence: 99%

“…Further, these studies provided empirical evidence that numerous factors were associated with annual restatements in the TSE, including firm's profitability, financial leverage, management tenure, auditor tenure and the size of audit firm (Saei et al, 2013). Considering these findings, audit fees literature and following Blankley et al (2012), the current study uses ABAFEE as an explanatory variable to examine its association with financial restatements.…”

Section: Introductionmentioning

confidence: 99%

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Abnormal audit fees and future restatements: evidence from Tehran Stock Exchange

Salehi

Farhangdoust

Vahidnia

2017

IJAAPE

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Abstract:The aim of this paper is to provide empirical evidence for the impact of abnormal audit fees on future restatements. We examine whether firms that restate their financial statements have higher levels of total audit fees than their counterparts. In this regard, the authors test their hypothesis by performing panel data analysis on a sample of 936 firm-year observations from companies listed on the Tehran Stock Exchange during 2009-2014. We find that there is a negative relationship between the two; specifically, abnormal audit fees are lower in the periods leading up to the occurrence or announcement of the restatement (i.e., the next fiscal year).

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Section: Introductionmentioning

confidence: 94%

Section: Future Restatements and Abafeementioning

confidence: 99%

Section: Future Restatements and Abafeementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Abnormal audit fees and future restatements: evidence from Tehran Stock Exchange

Salehi

Farhangdoust

Vahidnia

2017

IJAAPE

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“…13 Higher fees and dependence (measured by higher fees) are not usually found to be associated with reduced auditor independence. There is evidence that higher audit quality is associated with more important clients, as measured by fees (Gaver and Paterson 2007;Hunt and Lulseged 2007;Blankley, Hurtt, and MacGregor 2012). In China, Chen, Sun, and Wu (2010) report lower quality where there is fee dependence before 2000, but higher quality after 2000 (measured by modified opinions).…”

Section: Issue 2: Relative Size Of Fees and Dependencementioning

confidence: 99%

Audit Fee Research on Issues Related to Ethics

Hay

2017

Current Issues in Auditing

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SUMMARY Audit fees are related to important ethical issues for auditors. There has been increasing research on audit fees recently, including research on potential ethical risks regarding audit fees, which helps to illuminate some of these professional issues. The International Ethics Standards Board for Accountants (IESBA) is very interested in this area and asked me to prepare a paper reviewing the relevant research. This summary reviews research that became available from 2006 to 2016 on four issues related to audit fees—fee level, dependence, non-audit fees, and firms that have a significant non-audit services business. Examining the research shows consistent evidence about two issues, namely that audit fees for new engagements are lower and that non-audit services affect independence in appearance. There are two further issues about which there is some concern. First, there are occasional studies reporting evidence that non-audit services provided by an auditor are associated with a loss of independence indicated by lower audit quality, even though most research does not support this conclusion. Second, there has been recent concern about growth in non-audit services to non-audit clients and there is some preliminary evidence that audit quality is lower in firms that have more extensive non-audit businesses. In general, although audit fee research does not convey a message that there are widespread ethical problems, the body of research shows that there are some risk areas.

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Fair value hierarchy, bargaining power, and audit pricing across audit firms’ client portfolios

Clark

Vagner

Ward

2022

J Corp Accounting Finance

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This study explores how the presence of Level 2 and/or 3 fair value assets (FVA_23) influences audit pricing across small and large clients for Big-4 and non-Big-4 audit firms. Through analysis of 7918 firm-year observations, we investigate whether companies with FVA_23 incur higher audit fees than companies without FVA_23 and the differences between how Big-4 and non-Big-4 firms price risk for large and small companies. Our theoretical basis is product differentiation and economic importance, which suggest competing influences on audit fees based on firm and company size. We are the first to analyze the effect of FVA_23 on audit fees with the United States sample including all industries during a stabilized regulatory period, and we are the first to explore the effect of FVA_23 on audit pricing across small and large audit clients for Big-4 and non-Big-4 firms. We find companies with FVA_23 incur higher audit fees than companies without FVA_23. More specifically, we find small and large companies realize different audit fees compared to companies of similar size without FVA_23. Additionally, Big-4 and non-Big-4 firms price audits with FVA_23 differently than audits without FVA_23. Furthermore, Big-4 and non-Big-4 audit pricing is influenced by FVA_23 differently based on company size.

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Abnormal Audit Fees and Restatements

Cited by 296 publications

References 56 publications

Abnormal audit fees and future restatements: evidence from Tehran Stock Exchange

Abnormal audit fees and future restatements: evidence from Tehran Stock Exchange

Audit Fee Research on Issues Related to Ethics

Fair value hierarchy, bargaining power, and audit pricing across audit firms’ client portfolios

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